Your Backtest Filled at the Price It Wanted: Slippage, Gaps and the Execution Gap Nobody Prices In

In the Strategy Tester, your order is filled at the price the model says. In a live account it is filled at the price someone is willing to give you, at that moment, in that liquidity. The distance between those two is a cost, and most published backtests set it to zero.

Three sources dominate. Slippage: the market moves between the decision and the fill, and stop orders in fast markets are especially exposed. Weekend and news gaps: price reopens past your stop level, so the stop executes worse than it was set. Requotes and rejections on some execution models, which turn a planned trade into no trade at all.

Entry slippage is roughly symmetric over many trades — sometimes better, sometimes worse. Stop-loss slippage is not: gaps tend to blow through the stop in the losing direction, because that is the direction the market was already moving. A backtest that assumes exact stop fills systematically understates the size of the worst losses.

The cost scales with how tight the target is relative to the noise. A scalper aiming for a few points can have its entire edge consumed by half a point of slippage per trade. A daily-timeframe system aiming for a multi-week move can absorb the same slippage without noticing. Frequency multiplies it: 2,000 trades a year at one extra point each is a real annual charge.

Re-run the backtest with a wider spread than your broker's average and, if your platform allows it, with an added slippage assumption. Then compare the result to the original. If a strategy only works with perfect fills, it does not work.

We run our published tests on real tick data with real variable spread rather than an idealised fixed-spread model, because a fixed-spread test quietly removes the exact moments — news, rollover, thin liquidity — when execution is worst. That does not simulate your broker's slippage, so we also tell buyers to confirm behaviour on a demo account with their own broker first.

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